Depreciation is the periodic allocation of the cost of an asset to expenses over its estimated useful life, made in a rational and systematic manner.
The amount of depreciation expensed for each month is called Depreciation expense and is recorded into the Depreciation expense account. Depreciation expense is also recorded on each long-term asset into a separate Accumulated Depreciation Account.
Examples of accumulated depreciation accounts include:
Accumulated Depreciation—Building.
Accumulated Depreciation—Copier
Accumulated Depreciation—Truck,
Accumulated Depreciation—Office Equipment,
and so on.
The purpose of each Accumulated Depreciation account is to show how much of the cost of the asset has been allocated as an expense to previous accounting periods; its balance shows the cumulative sum of all depreciation expense recorded for that asset.
The difference between a depreciable asset´s cost and its related accumulated depreciation is referred to as the carrying value, or book value, of that asset.
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